Negotiating Against the Odds: A Guide for Trade Negotiators from Developing Countries

By Commonwealth Secretariat and E. Jones

Drawing on the experiences of more than 100 developing country negotiators and the insights of leading academic studies, this guide brings together practical advice and lessons on ways to negotiate effectively with larger parties, and avoid common pitfalls.

• Language: English
• Publisher: Palgrave Macmillan
• Release date: Apr 2, 2013
• ISBN: 9781137320247

Book preview

1

Introduction

How do you succeed in a negotiation with a far larger party? Negotiators from many developing countries face this challenge on a regular basis. Asymmetries are most obvious when small developing countries negotiate with large industrialised countries or blocs such as the United States or European Union or with large developing countries such as China or Brazil. However, they are often present when they negotiate with larger neighbouring countries, or with multinational companies.

Negotiations in international trade are important for many developing countries. Many have small domestic markets, so trade with other countries is vital, and their high reliance on international trade makes them particularly vulnerable to changes in the rules that govern it. As a result, they have a strong interest in the outcomes of international trade negotiations.

Yet, when it comes to shaping these rules, these countries face many well-known structural, economic and political constraints. Due to their small market size, they have little to offer negotiating partners by way of market access concessions, the major currency of trade negotiations. Their institutional capacity is often limited so they have few trade negotiators and limited budgets. Compounding this, they may feel under pressure from more powerful states to comply with their interests.

Given these constraints, can negotiators from developing countries really expect to influence the outcome when they negotiate with a far larger party? While negotiators from smaller countries might not be able to ‘win’ every time, some do better than others. Experiences shows us that a smaller party can augment its power through the skilful use of negotiating strategies and tactics. Time and again, the smaller party proves that it is more powerful than it appears at first glance, and the larger party turns out to be weaker than it first assumes. As a result, ‘the less powerful party in an international negotiation is not necessarily at the mercy of a more powerful party’ (Salacuse 2000: 257).

The less powerful party in an international negotiation is not necessarily at the mercy of a more powerful party.

Aim of this guide

This guide explores the ways in which developing countries can influence outcomes when they negotiate with larger parties. It was written in response to requests from negotiators, who wanted a resource that brought together practical advice and lessons in an accessible manner. It sets out to answer the question, ‘How can negotiators from small developing countries maximise their leverage and influence in international negotiations?’

It will be useful for those who are, or expect to be, engaged in negotiating on behalf of most developing countries, including officials of national governments, as well as advisers based in regional and international organisations. It will also be valuable for parliamentarians and representatives of private sector and civil society organisations, whether they are directly involved in negotiations or seek to influence the outcomes from outside. Finally, it will be useful for journalists and researchers, who seek to understand negotiating processes and explain their outcomes to the wider public.

While it focuses on international trade, the advice and many of the lessons contained in this guide are relevant to other areas of international negotiation, including aid, climate change and financial regulation.

The guide adopts no formal definition of a ‘small developing country’. Negotiators consulted during the production of the guide felt that the advice and lessons are likely to be useful to the majority of developing countries. With the exception of the very largest, developing countries frequently negotiate under conditions of asymmetry, interacting with parties that are far larger and better resourced.

Can negotiating really make a difference?

The manifold problems that negotiators from small developing countries face can lead to the pessimistic view that ‘no amount of negotiating will make a difference’. Evidence from surveys and interviews suggests that many negotiators have low expectations of success in negotiations with larger countries. In a survey of negotiators from small developing countries, conducted by the author more than half of the 93 respondents expected to have ‘low influence’ over the outcomes, while a fifth expected to have ‘no influence’ at all. Yet, more revealingly, interviews suggest that when negotiators from small developing countries have low expectations of success, they do not use leverage that they do have to the fullest extent. In the words of one negotiator, ‘we are not trying to influence negotiations. It’s unrealistic so we don’t go in with that mindset’ (Jones et al. 2010: 63).

While it is important not to underestimate the constraints small developing countries face, the examples and experiences in this guide provide cause for optimism. Through effective negotiation, small developing countries can avoid entering into agreements that they should reject, and they can successfully influence outcomes and obtain meaningful concessions. As another negotiator notes, ‘when you are small, you need to find other angles and approaches. Get yourself around the wall, don’t try and go over it. Meeting a wall doesn’t necessarily mean your objective cannot be reached’ (Jones et al. 2010: 54).

Get yourself around the wall, don’t try and go over it. Meeting a wall doesn’t necessarily mean your objective cannot be reached.

Sources and structure

This guide brings together valuable insights on ways to negotiate effectively and to avoid common pitfalls. It draws on three principal sources of information:

•   The experiences of more than 100 negotiators from small developing countries, gathered through an online survey, in-depth interviews, focus-group discussions and detailed case studies (these are analysed in detail in Jones et al. 2010).

•   An extensive review of the literature on negotiations, including from the business world and studies by scholars of international relations.

•   The findings and lessons were ‘road-tested’ by a group of leading negotiators from small developing countries.

It examines a broad range of international trade negotiations in which there is a substantial difference in the size of the parties at the negotiating table. This includes multilateral negotiations under the auspices of the World Trade Organization; regional integration projects between neighbouring countries of differing sizes; and bilateral negotiations including on free trade agreements and bilateral investment treaties. The guide also draws examples from negotiations between host governments and foreign investors. Although there are important differences between government-investor and inter-governmental negotiations, negotiations with private parties offer useful lessons for other asymmetric negotiations. In addition, negotiating well with foreign investors is a crucial part of surviving and thriving in the global economy.

Five chapters follow this Introduction:

•   Chapter 2: Preparation and Diagnosis. Accurately diagnosing the situation is essential for negotiating effectively. This chapter highlights key aspects of preparation and diagnosis, including convening the best possible negotiating team; identifying your country’s own interests and negotiating objectives, as well as those of other parties; the importance of establishing alternatives and thinking creatively about sources of leverage and influence; and developing a clear negotiating mandate.

•   Chapter 3: Moves Away from the Negotiating Table. Many of the important decisions that affect outcomes are taken either before the parties sit down at the table or away from the table once negotiations are underway. This chapter includes selecting the right forum and issues for discussion, creating coalitions and alliances, ensuring that the best people are at the table, and taking steps to influence public opinion. While much of the focus is on interaction with the representatives of the other party, actively managing relations with constituencies outside of the negotiating room is crucially important.

•   Chapter 4: Moves at the Negotiating Table. Once at the negotiating table, it is important to select appropriate tactics: framing your case persuasively, neutralising pressure tactics, and using personal behaviours and attributes to best effect. Three lessons, in particular, stand out. The first is the importance of psychology; to maximise their leverage, negotiators from small developing countries need to be optimistic, creative and tenacious. The second is the need to be thorough and vigilant, particularly with regard to scrutinising information and the moves of the other party. The third is the need to adapt, modifying your strategy and tactics in response to the moves of the other parties and changes in the environment outside the negotiating room.

•   Chapter 5: Putting the Right Foundations in Place. To maximise leverage in a given negotiation, it is vital that a series of underlying factors are addressed. This chapter covers recruiting and retaining high-calibre officials, ensuring smooth inter-governmental communication, strengthening coalitions and regional organisations, managing and improving input from interest groups and strengthening the evidence base.

•   Chapter 6: Conclusion. The guide concludes by reflecting on four overarching lessons that emerge from the preceding chapters, and suggests further reading.

A key lesson, and one that the guide emphasises throughout, is that small developing countries need to involve a wide range of policy- and decision-makers in order to maximise their influence in trade negotiations. This includes senior government officials and politicians, and, in some cases, parliamentarians, and representatives of business and civil society. Accordingly, the guide uses the term ‘negotiator’ in a flexible manner, often referring to all those who have a significant role to play in policy- and decision-making during negotiations, irrespective of whether or not they sit at the negotiating table.

2

Preparation and Diagnosis

If there is one lesson that emerges from the negotiation literature, it is the importance of thorough preparation. Inadequate preparation is one of the most common and costly mistakes in negotiations, and the investment needed should not be underestimated (Malhotra and Bazerman 2007). As an experienced negotiator notes, ‘Planning in negotiation is as meticulous as preparation for war’ and it can involve weeks of arduous work (Bhuglah 2004). As a rule of thumb, one expert suggests that 80 per cent of the work in a given negotiation should go into preparation, and 20 per cent into the negotiation itself (Thompson 2012).

Planning in negotiation is as meticulous as preparation for war and it can involve weeks of arduous work.

Two types of preparation are important in a trade negotiation. The first concerns the steps that need to be taken before entering into a specific negotiation. This includes accurately diagnosing the situation, convening the best possible negotiating team identifying precise negotiating objectives and developing a clear negotiating mandate. These are addressed in this chapter.

The second type of preparation is longer term. Long-term preparation focuses on improving the underlying institutions in order to bolster a country’s overall negotiating capacity. Key improvements include recruiting and retaining high-calibre negotiators, developing a strong evidence base, strengthening cross-government coordination and finding ways to effectively solicit contributions from stakeholders. These are addressed in Chapter 5.

Types of negotiation

In our increasingly complex, diverse and dynamic world, negotiation is one of the most practical and effective mechanisms we have for allocating resources, balancing competing interests and resolving conflicts of all kinds (Malhotra and Bazerman 2007). This is true for trade, as it is for many other areas of international life.

A key condition for negotiation is that there must be a degree of interdependence between the parties. Independent parties do not negotiate because they do not need the other party to achieve their goals. At the other extreme, in situations of complete dependency, no negotiation is needed as the stronger party can dominate its counterpart and take whatever it wants.

Many people see a negotiation as a battle line, in which one side’s gain necessarily implies another side’s loss: Parties sit down at the bargaining table with the sole objective of walking away with their share and most of the other party’s too. While it is possible to conceive of purely ‘win-lose’ or ‘zero-sum’ negotiations, much of the literature on negotiations is dedicated to debunking this myth, and showing that in most negotiations it is possible for the parties to work together to create new value, resulting in an agreement that can, in principle, leave everyone better off.

However, this does not mean that most negotiations are purely ‘win-win’, cooperative affairs. Indeed, far from it. In a typical negotiation, negotiators have two objectives. They seek to create as much joint value as possible (thereby maximising the size of the pie) and to claim as much value as possible for their party (thereby maximising the size of their slice). Such negotiations are referred to as ‘variable-sum’.

Three types of negotiation

•   ‘Win-lose’, where interests are diametrically opposed so a ‘win’ for one party is a ‘loss’ for the other, and the only incentive of the parties is to compete;

•   ‘Win-win’, where the interests of the parties are entirely complementary and the only incentive of the parties is to cooperate;

•   ‘Variable-sum’, where the parties have incentives both to cooperate in order to realise joint gains and to compete over division of resources that are generated in order to maximise their share.

‘Variable-sum’ negotiations pose a challenge for negotiators as they have incentives to both cooperate (to realise joint gains) and to compete (over the division of these gains). Managing the tension between these two incentives requires significant skill. Hardball moves to claim value can result in a loss of trust and cooperation, leading to unnecessary impasse and breakdown. Yet being too open and trusting can lead to the more cooperative party walking away with little of the value that it helped to create (Lax and Sebenius 2006; Thompson 2012). Techniques for overcoming the ‘negotiator’s dilemma’ are discussed in Chapter 4.

In the trade context, most negotiations are ‘variable-sum’. Indeed, recent survey evidence suggests that negotiators from small developing countries typically see negotiations with large countries as ‘variable-sum’ rather than the extremes of ‘win-win’ or ‘win-lose’. In a survey negotiators were asked ‘how often are the outcomes that your country is seeking in trade negotiations compatible with those of powerful states?’ Of the 93 respondents, drawn from 30 small developing countries, 8 answered ‘nearly always’ or ‘often’, 45 answered ‘sometimes’, and 40 answered ‘seldom’ or ‘almost never’ (Jones et al. 2010: 83).

During a ‘variable-sum’ negotiation, studies show that it is common for negotiators to focus their attention on the ‘win-lose’ aspects, overlooking the potential areas for joint gain. Negotiators focusing on the ‘win-lose’ aspects usually adopt one of three mindsets when preparing for negotiation. They resign themselves to capitulation (common among weaker parties); prepare themselves for attack (common among the stronger parties); or seek to compromise in an attempt to split the value on the table. These mindsets run the risk of an inefficient negotiation where value is left ‘on the table’ (Thompson 2012).

Discussions with negotiators from small developing countries suggest that they do not always accurately diagnose the negotiation. In some instances, they wrongly assume that their interests are diametrically opposed to those of large states and that there is no possibility for joint gain. This possibility is particularly likely if there has been animosity between the two parties in the past. In other instances, negotiators wrongly assume that the large country will be flexible. This may arise because the other party has a long history of being a major aid donor, so the developing country expects it to adopt a benevolent approach. Alternatively, the smaller country may expect the larger to be flexible because it considers itself to be an important political ally. Colombia, for instance, mistakenly assumed that the United States would be generous in trade negotiations because it perceived itself to be a strategic ally (Garay et al. 2011).

A further common pitfall is that negotiators fail to identify the best moment for meaningful negotiation. In international trade negotiations, key decisions are often made by large states far in advance of the formal negotiations. For instance, the United States and the European Union (EU) develop detailed negotiating mandates as well as template legal texts before bilateral negotiations. These ‘model’ free trade agreements (FTAs) or bilateral investment treaties are often the product of intense internal political debate. When formal negotiations start, a model text is often presented to developing countries as ‘fait accomplis’, and there is often little room for influence, except at the margins. In some instances, including in the case of the EU and the United States, negotiators tie their hands by having the model text approved by senior ministers or the legislature, to whom they have to revert for approval in order to make even minor changes. In such situations, developing countries are likely to have greater impact over the final outcome if they can influence these up-stream processes, by developing alliances with political stakeholders in the large states who can push for greater flexibility when the negotiating mandate or template text is first drafted.

All too often small developing countries undermine their influence by failing to participate actively in the initial deliberations.

Similarly, while large ministerial meetings and summits capture the headlines, leaders often meet at such occasions to endorse agreements that have been hammered out by senior officials during preparatory talks. All too often small developing countries undermine their influence by failing to participate actively in the initial deliberations, focusing their resources on attending the high-profile meetings instead. For instance, during the 2011 UNCTAD (United Nations Conference on Trade and Development) IV Conference for Least Developed Countries, several least developed countries sent large, high-level delegations in the hope that this would enable them to secure concessions from industrialised countries. However, they came away with very little as the major decisions had all been made beforehand and many of the major industrialised countries were not even represented at a senior level during the meeting.

Success in a negotiation

What counts as success in a negotiation? The negotiating literature has a variety of different definitions. The following is one of the more helpful:

The negotiating objective should be to create and claim value for the long term by crafting and implementing a deal that is satisfactory for both (or all) parties.

(Lax and Sebenius 2006: 16)

At the heart of this definition is the need for an effective negotiator to fulfil the twin objectives of creating and claiming value: helping create as much joint value